1099-R Income and Stimulus

[Gretel]

Had a client come in. Received first retirement check with note that withholding is reduced due to Stimulus package. She got $5 more this time. Looks like we will have withholding mess with our 1099-R's as well or is there something else wrong? Wants me make quit my job.

[JG EA]

Nope nothing else wrong. They have to follow the tables also. But if she is paid monthly that would not be too much. She'll get a $400 credit to offset.

[Gretel]

Wait a second. Did I totally miss this?? I thought this credit was for working people only and others get something like $2.. if they qualify. I mean the credit is called "Making Work Pay Tax Credit".

[ChEAr$]

You are correct

Wait a second. Did I totally miss this?? I thought this credit was for working people only and others get something like $2.. if they qualify. I mean the credit is called "Making Work Pay Tax Credit".

Reduced withholding applies only to employees, i.e. W2 income and not 1099R
income. Somebody needs educating.

[JG EA]

Reduced withholding applies only to employees, i.e. W2 income and not 1099R
income. Somebody needs educating.

I won't be surprised if I am wrong but Pub 15 T First page (The new tables) says:

For the calculation of income tax withholding on pensions,
the new withholding tables also apply

Does this have a different meaning like on deferred compensation or something? Educate please.

[AJsTax]

The $400

tax reduction is for any taxable income. Once you get to that line on the tax return the type of income has no bearing.
That is my understanding at this point, and to me, the only common sense explanation.
But of course we are talking taxes here, so common sense???

[Jesse]

Wait a second. Did I totally miss this?? I thought this credit was for working people only and others get something like $2.. if they qualify. I mean the credit is called "Making Work Pay Tax Credit".

This is what I thought.

tax reduction is for any taxable income. Once you get to that line on the tax return the type of income has no bearing.
That is my understanding at this point, and to me, the only common sense explanation.
But of course we are talking taxes here, so common sense???

If all tables changed I hope you are correct. It stinks to throw in these changes during the busy season. No time for research.......how many days until the 15th!?!

[ChEAr$]

I didn't read that

I won't be surprised if I am wrong but Pub 15 T First page (The new tables) says:


Does this have a different meaning like on deferred compensation or something? Educate please.

when I was using the 15 T information to revise my client's computer programs data files.

However any pensioner who doesn't submit a new W4 form will come up short next time
round. Question arises, then, is it the pension payor's duty to inform all recipients of
this?

[JG EA]

On page 73 of the new tables Pub 15 T there is a page to notify taxpayers. Whether it will get sent to everyone or not is the question. If it gets sent I think it'll be enough notice. I don't think another notice from us will make them take any specific action. The only way they can take action and change their W-4 (and W-4P I'm educating here) is to have us help them in their specific situation.

[ChEAr$]

Yes, I read that

On page 73 of the new tables Pub 15 T there is a page to notify taxpayers. Whether it will get sent to everyone or not is the question. If it gets sent I think it'll be enough notice. I don't think another notice from us will make them take any specific action. The only way they can take action and change their W-4 (and W-4P I'm educating here) is to have us help them in their specific situation.

But it is headed up as a notice to employees. I doubt that pension payors will send it
out.

therefore, for all estimates for pensioners who have withholding I will adjust each quarterly
federal installment for a max of 100$ more.